Subject to Financing

[David Caradonna]

Good afternoon. I recently came across an interesting situation where I believe subject to financing would be a good situation but I have never been through this before so looking for some help. 

Long story short I was in contract to purchase an investment property to BRRRR (or flip depending). We were in contract but two days before closing, it turns out they had a $9,800 tax lien against the property. The issue is they have no equity in the home so it was either they paid $9,800 they don't have, or I took on the lien which I didn't want to do as that would have needed to come out of pocket before the title is clear. I was using a hard money loan for the acquisition and renovation.

The seller is in pre foreclosure. Would a subject to deal make sense? I could pay off the tax lien right away, get them paid up, and have the deed signed over to myself while taking over the mortgage payments. The property would be vacant upon closing and then I then plan to complete the renovations. At that point, the out of pocket costs would actually be less as well since it would just be the tax lien. 

I've never gone this path before so just wondering if that makes sense. Any experts in the Tampa or FL area? I don't have a lawyer on my team which I'd assume is needed. Anyone with any experience  in this would be great. I'm trying to get creative to not only acquire the home but save the sellers from a foreclosure if I can. She's a really nice woman, going through a nasty divorce, and trying to move on. 

Thanks so much in advance. 

[Kristina Kuba]

@David Caradonna

The creative financing strategy of subject to is used best when there is no bank involvement because you are essentially transferring the deed but making payments to the mortgage company from an LLC. One trick I learned is, let's say you are doing a Tampa subject to deal, you can create an LLC like "Tampa property maintenance" and send the mortgage bill payment checks from there. This will not raise any suspicion with the bank.

I’ve never dealt with a subject of a foreclosure deal and I am assuming if the home seller wants to get caught up it would require some more legal ppw between the bank and yourself and things could get complicated. Let us know how you do. Best of Luck!